It’s become somewhat of a tradition for Apple Inc. (NASDAQ:AAPL) to face a reality check after its annual iPhone event. When a new iPhone doesn’t quite match all the pre-release rumors, Apple stock tends to take a slight dip.
This year is different. There has been weak iPhone 8 demand and after a full week of pre-orders, most models will still ship immediately.
Lines at Apple Stores on the first day of sales are virtually non-existent. With iPhone 8 sales shaping up to be unexpectedly slow, Apple stock slid another 1.7% overnight.
The wildcard in all of this, of course, is the iPhone X. Maybe people are holding out for the new flagship iPhone. But maybe they’re not. And even if they are, it’s questionable whether they’ll be able to buy one anytime soon.
iPhone 8 Demand Low
There have been signs that the new iPhone 8 isn’t going to be as popular as previous models ever since Apple began accepting pre-orders the Friday following this year’s big Apple event.
There was no real slipping in ship times as traditionally happens with iPhone pre-orders. Analysts quickly warned that iPhone 8 demand was significantly lower than for previous models.
Several days ago, Bloomberg published stats showing iPhone 8 pre-sales in China were down even lower. A popular website notched 1.5 million iPhone 8 sales in the first three days compared to 3.5 million for last year’s iPhone 7.
I can see the effect myself. Last year I ordered an iPhone 7 Plus on the first day of pre-sales. Despite being early in, a backlog of orders meant it didn’t arrive until November.
At the time of writing today, I can go on the Apple website and order virtually any iPhone 8 — even an iPhone 8 Plus in gold — and it will ship within one business day.
Either Apple built up a massive iPhone 8 inventory, or iPhone 8 sales are going to disappoint. The launch day line-up reported at an Australian Apple Store is described by Reuters as “weak,” with less than 30 people in line compared the hundreds who would usually be there for a new iPhone.
The lack of lineups suggests that it’s low demand for the new iPhone at play, not a big stockpile of launch inventory.
The iPhone X Factor
If the iPhone 8 was the release for Apple this year, the outlook would be far grimmer and Apple stock would be sitting much lower than it is today. However, there’s a wildcard in the form of the iPhone X.
It’s entirely possible that there are vast numbers of Apple fans who are skipping the iPhone 8 and instead holding out for the $999 iPhone X. In that case, the relatively low iPhone 8 demand isn’t a big deal. In fact, it would be good news for investors if consumers were willing to spend the extra $300 or more.
The problem is the iPhone X isn’t available for pre-order until October 27. Even then, there are big signs that the new flagship iPhone supplies will be severely constrained. Speculation is that the iPhone X won’t even go into production until mid-October, and won’t hit full production until December.
We won’t really know if those potential iPhone shoppers are holding off on the iPhone 8 because they are waiting for the iPhone X until the end of October. Who knows, maybe some of them have decided that Alphabet Inc’s (NASDAQ:GOOGL) Pixel 2 — due to arrive Oct. 4 amid the excitement of Google snapping up 2,000 engineers from HTC — is the better bet.
What happens if they are holding out for an iPhone X, but the prospects of getting one before 2018 are grim. Will they buy an iPhone 8 instead? Skip this release cycle altogether and just buy the latest and greatest — iPhone XI? — next September? Or maybe they’ll cave and check out the competition.
Apple’s strategy of releasing multiple new iPhones, then staggering their availability was always a gamble, but it’s generating an unprecedented degree of uncertainty. These are uncharted waters at a time when smartphone competition is fiercer than ever.
Apple stock is down over 4.5% since the company unveiled the iPhone 8 and iPhone X. Unless iPhone sales on launch weekend are stronger than the signs point to them being, AAPL investors are going to be jittery with no relief until at least Oct. 27.
